Tokyo Sankei Building

S-GATE Akihabara

Breezé Tower

S-GATE Nihonbashihoncho

June 17, 2019

1st Fiscal Period (Ending August 2019)
Interim Financial Results Briefing Materials

AssetManagement
CompanySANKEI REAL ESTATE Inc.

Table of Contents
Executive Summary…… P2

1. IPO Highlights…… P3

2. 1st Fiscal Period (Ending August 2019)
Interim Financial Summary…… P7

3. Future Growth Strategies…… P113-1 External Growth Strategy…… P12

3-2 Internal Growth Strategy…… P16

3-3 Financial Strategy…… P19Topics…… P20Appendix…… P21

1SANKEI REAL ESTATE Inc.

Executive Summary
IPO Highlights• Launched IPO in March 2019 with quality portfolio centering on office buildings in central Tokyo• Investment unit price exceeding issue price and going strong
1st Fiscal Period (Ending August 2019) Interim Financial Summary• Actual asset management period: 50 days (from March 12, 2019 to April 30, 2019)• Earnings forecasts remain unchanged from IPO
External Growth Strategy• Accelerate speed of external growth through “Asset recycling business model” with sponsor• Growth drivers are sponsor’s development and sourcing capabilities
Internal Growth Strategy• Portfolio maintaining high occupancy rate
• Closing the rent gap is the immediate mission
Topics• Strengthening of management structure• Adoption of investment unit ownership plan under consideration

2

SANKEI REAL ESTATE Inc.

1. IPO Highlights

3

SANKEI REAL ESTATE Inc.

Launched IPO on J-REIT Market in March 2019
IPO SummaryMarket reactions

Type of offering

Domestic offering

Date of listing

March 12, 2019

Number ofinvestment units
offered

238,600 units(including 11,362 units through over-allotment)

Number ofinvestment units
issued and outstanding

239,600 units

Issue price

100,000 yen per unit

Total paid-in amount

Approx. 23.0 billion yen

Asset managementcompany

Sankei Building Asset Management Co., Ltd.

Sponsor

The Sankei Building Co., Ltd.

Number of properties

8 properties

Asset size(on acquisition pricebasis)

Approx. 43.4 billion yen

SANKEI REAL ESTATE Inc. (2972):
Stimulating Hunger for Office Properties; Struggle to Stop
Streak of Losses (excerpt)
IPO prices of REITs falling below initial prices has become nothing to be
surprised about and the secondary markets also continue to be on a low note.
To stop a streak of losses, SANKEI REAL ESTATE “managed to have investors
left hungry enough not to eat up additional demand in the aftermarket” (bookrunner). To that end, SANKEI REAL ESTATE “spent a considerable amount oftime discussing the allocation” (another book runner). The portion for
institutional investors increased by 5% from the initial plan for an allocation of
75% to retail investors and 25% to institutional investors.
Subscription was around 1.5 times for retail investors and around 6 times for
institutional investors, altogether averaging around 2.5 times. Shinkin banks
and credit unions were included in the portion of retail investors. Roadshows,including teleconferences, were run from February 8 to 18 targeting 57
investors. Property viewing, which is rare for an IPO roadshow, was also held
taking investors to Tokyo Sankei Building, a landmark property of the Fuji
Sankei group, and S-GATE OTEMACHI-KITA.
The scarcity of office space in central Tokyo seems to have whetted investors’
appetite. In particular, interest from central financial institutions was stronger
than expected, and “that was a positive surprise” (person related tosubscription). The vacancy rate for offices continues to fall and the rent has
shown a steady increase. On the other hand, with the surging real estate
prices, there are fewer cases of J-REITs newly acquiring office buildings incentral Tokyo. An investor who participated in the offering said, “The upsidefrom rent increase can be expected over the long term amid the harshacquisition environment, provided the current supply-demand balanceremains unchanged.”[Nagisa Ikebe, CAPITAL EYE NEWS]4SANKEI REAL ESTATE Inc.

Quality Portfolio Centering on Office Buildings in Central Tokyo
Investment Policy

Portfolio List (as of last day of April 2019)70%

Office buildings

Approx.
%Greater Tokyo, Osaka City andNagoya Cityor moreSub assets*

Approx.
%Cities designated by government
ordinance (excl. above), core cities
and major regional cities%
or less

80
20

Type

30

Property
numberOsaka City
19.8%
Other Tokyo
23 wards
8.7%

Investment
Ratio byAsset Type

Chiyoda Ward
24.0%
Investment
Ratio byGeographic
Area

Office buildings
79.4%

Officebuildings

Chuo Ward
47.5%

Portfolio Features(as of last day of April 2019; on acquisition price basis)
Ratio ofoffice buildings

79.4%

Averagebuilding age

71.5%

Ratio of properties
developed by sponsor

Acquisition
price(millionyen)Appraisalvalue(millionyen)Appraisal
NOI yield

Investment
ratio

Tokyo Sankei Building(2% co-ownership interest)

Chiyoda-ku,
Tokyo

2,509

2,540

2.8%

5.8%

A-2

BREEZÉ TOWER
Kita-ku,(30% quasi-co-ownership interest
Osaka-shi,of the sectional ownership of theOsakaoffice portion of the building, etc.)

8,600

9,300

4.7%

19.8%

A-3

S-GATE NIHONBASHI-HONCHO(51% co-ownership interest)

Chuo-ku,
Tokyo

6,698

6,780

3.8%

15.4%

A-4

S-GATE AKIHABARA

Chiyoda-ku,
Tokyo

2,055

2,080

3.9%

4.7%

A-5

Hibiya Sankei Building

Chiyoda-ku,
Tokyo

5,829

5,900

3.7%

13.4%

A-6

Hatchobori Sankei Building

Chuo-ku,
Tokyo

4,959

5,020

4.7%

11.4%

A-7

Toyo Park Building

Koto-ku,
Tokyo

3,782

3,790

4.4%

8.7%

34,43435,410

4.1%

79.4%

8,961

9,070

3.9%

20.6%

43,39544,4804.1%

100.0%

Office buildings subtotal or average(total of 7 properties)

15.8 years
SubassetsRatio ofTokyo central 3 wards

Location

A-1

Portfolio at IPO (on acquisition price basis)
Sub assets
20.6%

Property name

66.4%

B-1

Hotel Intergate Tokyo Kyobashi

Portfolio total or average(total of 8 properties)* “Sub assets” collectively refer to asset types that possess characteristics different from “office buildings” and which contribute to building a strong
portfolio that features both revenue stability and growth capable of withstanding the cyclical real estate market.

Chuo-ku,Tokyo

5

SANKEI REAL ESTATE Inc.

Investment Unit Price Exceeding Issue Price and Going Strong
Investment Unit Price and Trading Volume(units)(yen)
Volume30,000120,000

SANKEI REAL ESTATE Inc.
TSE REIT Index

25,000Inclusion in TSE REIT Index

115,000

20,000110,000

IPO
15,000105,000

10,000100,000

5,000

95,000090,000
3/12
3/12

3/19
3/19

3/27
3/27

4/3
4/3

NAV per unit*2

4/10
4/10

4/17
4/17

4/24
4/24

98,105 yen

5/9
5/9

5/16
5/16

5/23
5/23

5/30
5/30

NAV multiple*3

6/6
6/6

6/13
6/13

6/20
6/20

6/27
6/28

1.12x

*1. The TSE REIT Index is indexed to SANKEI REAL ESTATE Inc.’s closing price on March 12, 2019 (100,700 yen).
*2. NAV per unit = (Net assets + Unrealized gain on appraisal basis) ÷ Number of investment units issued and outstanding*3. NAV multiple = Investment unit price (closing price) on June 7, 2019 ÷ NAV per unit

6

SANKEI REAL ESTATE Inc.

2. 1st Fiscal Period (Ending August 2019)
Interim Financial Summary

7

SANKEI REAL ESTATE Inc.

Interim Balance Sheet and Interim Statement of Income(actual asset management period: 50 days)
Interim Balance Sheet (as at April 30, 2019)

Interim Statement of Income

Unit: million yen
Item
Current assets
Cash and deposits

Unit: million yen

Interim results

Item

Interim results

3,583
1,856

Cash and deposits in trust

935

Other

792

Non-current assets

44,081

Property, plant and equipment(from November 19, 2018 to April 30, 2019)

44,017

Operating revenue

328

Leasing business revenue

306

Other leasing business revenue

22

Operating expenses

135

Expenses related to leasing business

90

Intangible assets

6

Asset management fee

30

Investments and other assets

57

Asset custody and administrative service fees

6

Other operating expenses

8

Total assets

47,665

Operating profit
Current liabilities
Short-term borrowings
Other
Non-current liabilities

192

5,214

Non-operating income

0

4,913

Interest income0301

Non-operating expenses

273

19,406

Interest expenses

10Long-term borrowings

17,400Borrowing related expenses

135

Other

2,006

Investment unit issuance expenses

67

Total liabilities

24,621

Other

60

Unitholders’ equity

23,043Unitholders’ capital
Surplus23,124(81)

Total net assets

23,043

Total liabilities and net assets

47,665

Ordinary profit (loss)(80)

Profit (loss) before income taxes(80)

Profit (loss)(81)

Unappropriated retained earnings (undisposed loss)

(81)

8

SANKEI REAL ESTATE Inc.

Earnings Forecasts Remain Unchanged from IPO
Summary of Earnings Forecasts[In normal operations]
Accounting period

1st fiscal period

2nd fiscal period

3rd fiscal period

4th fiscal period(ending Aug. 2019)(ending Feb. 2020)(ending Aug. 2020)(ending Feb. 2021)

286 days

182 days

184 days

181 days

Operating revenue

1,140 million yen

1,222 million yen

1,279 million yen

1,295 million yen

Operating expenses

507 million yen

587 million yen

690 million yen

705 million yen

Expenses related to leasing business [Total]

339 million yen

409 million yen

514 million yen

526 million yen

Management fee

96 million yen

101 million yen

101 million yen

101 million yen

Utilities expenses

57 million yen

60 million yen

60 million yen

60 million yen

Repair expenses

41 million yen

41 million yen

47 million yen

57 million yen

Property taxes

0 million yen

49 million yen

147 million yen

147 million yen

Depreciation

106 million yen

115 million yen

115 million yen

118 million yen

167 million yen

178 million yen

175 million yen

178 million yen

103 million yen

115 million yen

114 million yen

113 million yen

Operating profit

632 million yen

634 million yen

588 million yen

590 million yen

Non-operating expenses

368 million yen

55 million yen

55 million yen

54 million yen

Ordinary profit

264 million yen

579 million yen

533 million yen

536 million yen

Profit

263 million yen

578 million yen

532 million yen

535 million yen

1,099 yen

2,414 yen

2,223 yen

2,235 yen

22,313 million yen

21,700 million yen

21,700 million yen

21,700 million yen

46.8%

45.7%

45.8%

45.8%

Other than expenses related to leasing business [Total]
Asset management fee

Distribution per unit
Balance of interest-bearing liabilities
LTV ratio (on total assets basis)*1. The assumption is that there will be no change in the number of investment units issued and outstanding (239,600 units).
*2. No cash distribution in excess of earnings is planned to be made at this point in time.
*3. For details, please refer to “Notice Concerning Operating Forecasts for the Fiscal Period Ending August 2019, Fiscal Period Ending February 2020, Fiscal Period Ending August 2020 and Fiscal Period Ending
February 2021” dated March 12, 2019.

9SANKEI REAL ESTATE Inc.

Status of Unitholders (as at April 30, 2019)
Aiming to broaden unitholder base through early expansion of asset size and proactive IR activities

Breakdown of Investment Units by Unitholder Type

Major Unitholders
Na me

Individuals/Other
30.5%
73,063 units
Financial
institutions
48.3%
115,731 units

Non-Japanese corporations, etc.
10.0%
23,861 units
Other Japanese corporations
8.9%
21,353 units

Securities companies
2.3%
5,592 units

Breakdown of Unitholders by Unitholder Type
Financial institutions
0.4%
40 persons

Non-Japanese corporations, etc.
0.4%
41 persons

Other Japanese corporations
1.6%
159 persons

Securities companies
0.2%
19 persons

Individuals/Other
97.4%
9,887 persons

Number of uni ts
owned

Shere of uni ts
owned

The Ma s ter Trus t Ba nk of Ja pa n, Ltd.
(trus t a ccount)

38,50416.07%

Ja pa n Trus tee Servi ces Ba nk, Ltd.
(trus t a ccount)30,135

12.57%The Sa nkei Bui l di ng Co., Ltd.

11,362

4.74%

Trus t & Cus tody Servi ces Ba nk, Ltd.
(s ecuri ties i nves tment trus t a ccount)

11,0284.60%

Ya ma to Shi nki n Ba nk

5,650

2.35%

Na tiona l Aus tra l i a Ba nk Li mi ted UBS Cl a ri on Gl oba l Property Securi ties Fund

4,441

1.85%

State Street Ba nk a nd Trus t Compa ny 505012

4,031

1.68%

Aozora Ba nk, Ltd.

3,556

1.48%

MLI for Cl i ent Genera l Non Trea ty-PB

3,266

1.36%

Trus t & Cus tody Servi ces Ba nk, Ltd.
(money trus t tax a ccount)

3,060

1.27%

115,03348.01%Total

10

SANKEI REAL ESTATE Inc.

3. Future Growth Strategies

11

SANKEI REAL ESTATE Inc.

3-1 External Growth Strategy (1)Accelerate speed of external growth through “asset recycling business model” with sponsor<Target asset size>
200 billion yen
to300 billion yen range<Target asset size>
100 billion yen

Aim for inclusion in global indices

Consider obtaining credit rating

43.4 billion yen

IPO

Approx. 1.5 years

Approx. 3 years
12

SANKEI REAL ESTATE Inc.

3-1 External Growth Strategy (2)Growth drivers are sponsor’s development and sourcing capabilities

Real estate market

External growthwith attention tobalance between
quality andprofitability

Pipeline from sponsor
Sponsor’s flagship properties

Reconstruction projects
Redevelopment orrevitalization projects

Development orreconstruction bysponsorTokyo Sankei Building
BREEZÉ TOWER

Properties under sponsor’s brands(S-GATE and Intergate Hotels)
S-GATE NIHONBASHI-HONCHO
S-GATE AKIHABARA
Hotel Intergate Tokyo Kyobashi

Joint venture projects

Income-producing properties incentral Tokyo

Sourcing by sponsor
Hibiya Sankei Building
Hatchobori Sankei Building
Toyo Park Building

Existing income-producing
properties

SANKEI REAL ESTATE Inc.

Development sites

Asset managementcompany’s
independent sourcing

13

SANKEI REAL ESTATE Inc.

3-1 External Growth Strategy (3)Pipeline potentially leading to portfolio resembling sponsor’s portfolio

Office Buildings Owned by Sankei Building(including development projects)

OtemachiFinancial City North Tower

Omori Park Building

S-GATE AKASAKA SANNOS-GATE OTEMACHI-KITA

Assets acquired at IPO

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21

Year ofcompletion

Development bysponsorOperation andmanagement by sponsor

Development project / Owned property

Location

Tokyo Sankei Building

Otemachi, Chiyoda-ku

2000

●

●

BREEZÉ TOWER

Umeda, Kita-ku, Osaka-shi

2008

●

●

JA Building

Otemachi, Chiyoda-ku

2009

●

Keidanren Kaikan

Otemachi, Chiyoda-ku

2009

●

Otemachi Financial City North Tower

Otemachi, Chiyoda-ku

2012

●

Tokyo Tokiwabashi 2027

Otemachi, Chiyoda-ku(Under development)●

S-GATE AKASAKA

Akasaka, Minato-ku

2015

●

Hareza Ikebukuro

Higashi-Ikebukuro, Toshima-ku(Under development)●

S-GATE AKASAKA SANNO

Akasaka, Minato-ku

2016

●

●

S-GATE OTEMACHI-KITA

Uchi-Kanda, Chiyoda-ku

2017

●

●

X-PRESS YURAKUCHO BLDG.

Yurakucho, Chiyoda-ku

2017

●

●

S-GATE AKIHABARA

Higashi-Kanda, Chiyoda-ku

2017

●

●

S-GATE NIHONBASHI-HONCHO

Nihonbashi-Honcho, Chuo-ku

2018

●

●

S-GATE HATCHOBORI (tentative name)

Hatchobori, Chuo-ku(Under development)●●

Hibiya Sankei Building

Yurakucho, Chiyoda-ku

1992

●

Hatchobori Sankei Building

Hatchobori, Chuo-ku

1965

●

Omotesando Sankei Building

Kita-Aoyama, Minato-ku

1994

●

Toyo Park Building

Toyo, Koto-ku

1991

Omori Park Building

Omori-Honcho, Ota-ku

1993

Namba Sankei Building

Minatomachi, Naniwa-ku, Osaka-shi

Osaka Honmachi Project

Honmachi, Chuo-ku, Osaka-shi

●

2005

●

●

(Under development)●●

Sponsor’s Portfolio (as of last day of March 2019; on book value basis)
Residential
8.3%

Osaka City
11.9%
Healthcare facilities
7.3%

Minato Ward
12.4%
Chuo Ward
1.3%

Ratio ofTokyo
central 3 wards

Hotels9.4%

Ratio ofoffice buildings

75.1%

88.1%
Chiyoda Ward
74.4%

14

SANKEI REAL ESTATE Inc.

3-1 External Growth Strategy (4)Pipeline potentially leading to portfolio resembling sponsor’s portfolio (projects under development)

S-GATE HATCHOBORI(tentative name)

Hareza Ikebukuro (Hareza Tower)

Overview
Location

Hatchobori, Chuo-ku, Tokyo

Location

Higashi-Ikebukuro, Toshima-ku,
Tokyo

Slated completion

March 2020

Slated completion

May 2020

Total floor area

3,918 m²

Total floor area

68,600 m²

Number of floors

10 floors above groundNumber of floors

33 floors above ground and2 floors below ground

Osaka Honmachi Project

Hareza Tower(office tower)Hall tower

Toshima civic centerTokyo Tokiwabashi 2027

Overview

No Image

Overview (Hareza Tower)

Tower-B

Overview

Tower-A

Location

Honmachi, Chuo-ku, Osaka-shi

Project site

Otemachi, Chiyoda-ku, Tokyoand Yaesu, Chuo-ku, Tokyo

Slated completion

October 2021

Site area

From end of Apr. 2021 to
fiscal 2027 (in phases)

Total floor area

29,786 m²

Total floor area

Approx. 31,400 m²

Total area

Approx. 686,000 m²

Tower-D

Number of floors

20 floors above groundTower-C(large-scale plaza on ground level)

15

SANKEI REAL ESTATE Inc.

3-2 Internal Growth Strategy (1)Closing the rent gap is the immediate mission

Occupancy Rate of Office Building Portfolio

Rent Revision Performance(from April 2018 to April 2019; on leased area basis; including replacements)

100.0%

Average for office building portfolio

95.0%

Rate of increase inamount upon upward rent revision:+21.7%- Tokyo Sankei Building (office portion)- BREEZÉ TOWER (office portion)- S-GATE NIHONBASHI-HONCHO*- S-GATE AKIHABARA- Hibiya Sankei Building- Hatchobori Sankei Building- Toyo Park Building*

90.0%

85.0%

Decrease 1%

No change
41%

80.0%
Last2017年
day of
3月末日
Mar.
2017

Last2018年
day of
3月末日
Mar.
2018

Last2019年
day of
3月末日
Mar.
2019

Increase58%

Last2019年
day of
4月末日
Apr.
2019

* For S-GATE NIHONBASHI-HONCHO and Toyo Park Building, data is as of last day of March 2019 andlast day of April 2019, respectively.

Tokyo Sankei Building+23.6%BREEZÉ TOWER+33.6%S-GATE NIHONBASHI-HONCHO–

S-GATE AKIHABARA–

Hibiya Sankei Building+9.5%

Hatchobori Sankei Building+1.7%

Toyo Park Building–

Rate of Deviation from Market Rent

Contract Renewal Schedule(for typical floorplate)(as of last day of April 2019; on leased area basis)

As at last day of Oct. 2018

As at last day of May 2019(tsubo)1,600

Rent gap*

Rent gap-8.3%-12.3%(on total rent basis; weighted average)(on total rent basis; weighted average)

1,195

1,000
800
600
260

200
0

* “Rent gap” refers to the figure arrived at when the amount of difference between the averagerent for SANKEI REAL ESTATE’s office building portfolio and the market rent calculated based on
new assumed achievable rent (typical floorplate) as stated in a market report prepared by CBRE isdivided by the market rent.

1,204

1,200

400

[Mainly attributable to rise in market rent]

1,483

1,400

1st2019年8月期
fiscal period(第1期)(ending Aug. 2019)2nd2020年2月期
fiscal period(第2期)(ending Feb. 2020)

3rd2020年8月期
fiscal period(第3期)(ending Aug. 2020)

4th2021年2月期
fiscal period(第4期)(ending Feb. 2021)

16

SANKEI REAL ESTATE Inc.

3-2 Internal Growth Strategy (2)Status of Rent Gap by Property
Building’s averagerent gap level

Concerned office building

Tokyo Sankei Building

Given the favorable market situation of office buildings in central Tokyo and the scarcity of large-scale office buildings with an
Otemachi address, this continues to be a building on which efforts should be focused.
In addition to having renovated the conference rooms and retail portions in phases, also proactively holding tenant gatheringsor other events and undertaking other initiatives for value enhancement from both tangible and intangible aspects.

BREEZÉ TOWER

With Osaka’s office market being favorable and there being many tenants whose contracts are up for renewal from the 3rd
fiscal period, this is a building on which efforts should be focused
While keeping a close watch on the status of competitive properties, promote this building’s attractiveness as a landmark of
Nishi-Umeda

S-GATE AKIHABARA

Located in a promising area that is gaining increasing attention mainly among IT businesses
With there being many tenants whose contracts are up for renewal in the 4th fiscal period, watch for rent increase
opportunities on a tenant-by-tenant basis

Hatchobori Sankei Building

Although constructed years ago, this building has undergone large-scale renovation and seismic base isolation, making it
highly competitive in the area
In light of there being few vacancies in surrounding areas, watch for rent increase opportunities on a tenant-by-tenant basis

S-GATE NIHONBASHI-HONCHO

Leased up 2 floors at close to market rent level upon construction completion in November 2018
In light of there being quite some time until contracts are up for renewal, this is a building where the present status is to be
maintained for the time being

Toyo Park Building

With favorable access to central Tokyo, this is a building for which there are certain needs as a Joto area hub
While keeping a close watch on the office market situation of surrounding areas and areas along the transportation line/route,watch for rent increase opportunities on a tenant-by-tenant basis

Hibiya Sankei Building

In addition to the scarcity of location being in close proximity to the Imperial Palace and Hibiya Park, also highly promisingthat the surrounding area redevelopments will boost the area’s potential
In conjunction with switching to LED and other value enhancement, watch for rent increase opportunities on a tenant-by-tenantbasis

More than −10%

−10% or less

Remarks

17

SANKEI REAL ESTATE Inc.

3-2 Internal Growth Strategy (3)Value Enhancement and Other Initiatives Contributing to Enhancement of NOI (sponsor performance)■Measures to reducebuilding management costs

・Switched electric power supply contract through electric utility bid; Reduction of up to −10% at 11 properties■Effective utilization ofcommon space, etc.

・Invitation to open space for holding of limited-time-only events and for food trucks to operate during
lunchtime (Tokyo Sankei Building)・Holding of fair and other events (Tokyo Sankei Building)■Investment in value enhancement

・Renovation of Otemachi Sankei Plaza (Tokyo Sankei Building in September 2018)
・Renovation of underground retail zone (Tokyo Sankei Building since March 2019)
・Retrofitting of air-conditioning system (Hibiya Sankei Building since 2016)
・Retrofitting to LED lighting(Tokyo Sankei Building, Hibiya Sankei Building and Hatchobori Sankei Building since 2016)
・Renovation of restrooms (Tokyo Sankei Building in July 2018)■Strategic tenant replacement forretail portions

・12.4% increase in average per-tsubo rent (Tokyo Sankei Building from 2014 to 2018)■Strengthening of BCP measures

・Installation of building safety assessment system that can assess the extent of damage on a floor-by-floor
basis in the event of an emergency (Tokyo Sankei Building and BREEZÉ TOWER)
・Review and expansion of emergency supplies stock (Tokyo Sankei Building)・Provision of emergency supplies stock to tenants (S-GATE NIHONBASHI-HONCHO and S-GATE AKIHABARA)■Enhancement of tenant services,and holding of events, etc.

・Installation of “e-Support+” that enables various applications to be made online(Tokyo Sankei Building, BREEZÉ TOWER, S-GATE NIHONBASHI-HONCHO, S-GATE AKIHABARA, Hibiya Sankei
Building and Hatchobori Sankei Building)・Holding of tenant gathering (Tokyo Sankei Building)・Shooting of drama and commercial in open space (Tokyo Sankei Building)Renovation of Sankei Plaza (Tokyo Sankei Building / September 2018)

BeforeAfter

18

SANKEI REAL ESTATE Inc.

3-3 Financial Strategy (1st Fiscal Period (Ending August 2019)’s Interim Period)
Financing Highlights

Maturity Ladder for Interest-Bearing Liabilities

Balance ofinterest-bearing liabilities

22,313
million yen

LTV ratio*1

46.8%

Ratio oflong-term debt

78.0%

Ratio offixed-rate debt

56.5%

Averagefinancing interest rate*2

0.33%

Averageremaining time to maturity

2.7 years

A portion of borrowings is planned to be repaid
early using refund of consumption taxes as thesource of funds for the repayment*1. “LTV ratio” is total interest-bearing liabilities divided by total assets, rounded to one decimal place.
*2. “Average financing interest rate” is the average of applicable interest rates at the end of April.
2019. Calculations are on an interest payable basis and do not include arrangement fee and otherborrowing related expenses.
2nd FPLTV ratio during normal operations
Policy is to maintain an approximate range of 40% to 50%
Projected LTV ratio at
end of 2nd FP*

Borrowing amount5th FP

7th FP

8th FP

9th FP

10th FP

11th FP

Resona Bank
8.07%
Shinsei Bank
8.07%

Interest rate

6th FP

Established stable bank formation through financing from 7 leading financial
institutions of Japan

Status of Lenders
Lender

4th FP

Lender Composition

45.7%* A portion (613 million yen) of borrowings is assumed to be repaid early using the refund of
consumption taxes as the source of funds for the repayment.

Term

3rd FP

Maturity date

Repayment method

Description

4,300 million yen Base rate (JBA 3-month JPY TIBOR) + 0.150%

Mar. 12, 2020

Lump-sum repayment
at maturity

UnsecuredNon-guaranteed

613 million yen Base rate (JBA 1-month JPY TIBOR) + 0.150%

Mar. 12, 2020

Lump-sum repayment
at maturity

UnsecuredNon-guaranteed

4,800 million yen Base rate (JBA 3-month JPY TIBOR) + 0.175%

Mar. 12, 2021

Lump-sum repayment
at maturity

UnsecuredNon-guaranteed

5,600 million yen 0.36969%

Mar. 12, 2022

Lump-sum repayment
at maturity

UnsecuredNon-guaranteed

3,700 million yen 0.42346%

Mar. 12, 2023

Lump-sum repayment
at maturity

UnsecuredNon-guaranteed

3,300 million yen 0.49096%

Mar. 12, 2024

Lump-sum repayment
at maturity

UnsecuredNon-guaranteed

Mizuho Bank
28.27%

Sumitomo Mitsui Trust Bank
9.41%

Short

Long

Loan syndicate with
Mizuho Bank, Ltd.
and
Sumitomo Mitsui
Banking Corporation
as the arrangers

Mizuho Trust & Banking
10.31%Development Bank of Japan
16.13%

Sumitomo Mitsui Banking
19.74%

19

SANKEI REAL ESTATE Inc.

TopicsStrengthening of Management Structure
Increase in directors and other officers or employees (4 persons)▶ Full-time positions:
9 persons at IPO↓
13 persons as of today(of which, 6 persons assigned to Investment Management Department and 5 persons assigned to Finance & IR Department)

Adoption of Investment Unit Ownership Plan under Consideration
Adoption of an investment unit ownership plan for the asset management company’s and the sponsor’s
directors and other officers or employees to acquire SANKEI REAL ESTATE investment units from their pay orother certain amounts is under consideration as an initiative to align interests with unitholders

20

SANKEI REAL ESTATE Inc.

Appendix

21

SANKEI REAL ESTATE Inc.

1st Fiscal Period (Ending August 2019) Interim Balance Sheet (unabridged)
As of April 30, 2019

As of April 30, 2019

Unit: thousand yen

Unit: thousand yen
Item

Item

Interim results

Interim results

Liabilities

AssetsCurrent liabilities

Current assets
Cash and deposits

1,856,163

Operating accounts payable

Cash and deposits in trust

935,874

Short-term borrowings

Operating accounts receivable

83,898

Accounts payable - otherPrepaid expenses

39,176

Income taxes payable

Consumption taxes receivable

667,420

Other
Total current assets

996
3,583,530

Buildings, net
Structures
Accumulated depreciation
Structures, net

143,744(864)
142,879
345
(1)
344

Land

2,429,523

Buildings in trust

7,619,417

Accumulated depreciation
Buildings in trust, net
Structures in trust
Accumulated depreciation
Structures in trust, net

Total current liabilities
Long-term borrowings

Property, plant and equipment
Accumulated depreciation

Other

114,369504
128,106
11,456
5,214,998

Non-current liabilities

Non-current assets
Buildings

Advances received

46,826
4,913,736(39,727)
7,579,690
15,369(70)
15,299Land in trust

33,849,883

Total property, plant and equipment

44,017,620

Leasehold and guarantee deposits received

17,400,000
88,992

Leasehold and guarantee deposits received in trust

1,917,422

Total non-current liabilities

19,406,415

Total liabilities

24,621,413

Net assets
Unitholders’ equity
Unitholders’ capital

23,124,900

Surplus
Unappropriated retained earnings (undisposed loss)
Total surplus
Total unitholders’ equity
Total net assets
Total liabilities and net assets(81,245)(81,245)
23,043,654
23,043,654
47,665,067

Intangible assets
Software6,476

Total intangible assets

6,476

Investments and other assets
Long-term prepaid expenses

47,439Leasehold and guarantee deposits

10,000Total investments and other assets
Total non-current assets
Total assets

57,43944,081,536
47,665,067

22

SANKEI REAL ESTATE Inc.

1st Fiscal Period (Ending August 2019) Interim Statement of Income (unabridged)
From November 19, 2018 to April 30, 2019
Unit: thousand yen
ItemInterim results

Operating revenue
Leasing business revenue

306,041

Other leasing business revenue

22,422

Total operating revenue

328,464

Operating expenses
Expenses related to leasing business

90,247

Asset management fee

30,334

Asset custody fee

2,077

Administrative service fees

4,183

Remuneration for directors (and other officers)

3,600

Other operating expenses

5,095

Total operating expenses

135,538

Operating profit

192,926

Non-operating income
Interest income

0

Total non-operating income0

Non-operating expenses
Interest expenses

10,578Borrowing related expenses

135,538

Investment unit issuance expenses

67,393

Organization expenses

58,157

Other
Total non-operating expenses

2,000
273,667

Ordinary profit (loss)(80,741)

Profit (loss) before income taxes(80,741)

Income taxes - current
Total income taxes

504
504

Profit (loss)(81,245)

Unappropriated retained earnings (undisposed loss)(81,245)23

SANKEI REAL ESTATE Inc.

1st Fiscal Period (Ending August 2019) Interim Statement of Cash Flows
From November 19, 2018 to April 30, 2019
Unit: thousand yen
ItemInterim results

Cash flows from operating activities
Profit (loss) before income taxes(80,741)

Depreciation

40,664

Investment unit issuance expenses

67,393

Interest income
Interest expenses(0)
10,578Decrease (increase) in operating accounts receivable(83,898)

Decrease (increase) in consumption taxes refund receivable(667,420)

Decrease (increase) in prepaid expenses(39,176)

Increase (decrease) in operating accounts payable

46,826

Increase (decrease) in accounts payable - other114,369

Increase (decrease) in advances received

128,106

Decrease (increase) in long-term prepaid expenses(47,439)

Decrease (increase) in other assets(996)

Increase (decrease) in other liabilities

1,295

SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities(510,440)
0
(417)
(0)
(510,857)

Cash flows from investing activities
Purchase of property, plant and equipment(2,573,613)

Purchase of property, plant and equipment in trust(41,484,671)

Proceeds from leasehold and guarantee deposits received
Proceeds from leasehold and guarantee deposits received in trust
Payments of leasehold and guarantee deposits
Other, net
Net cash provided by (used in) investing activities

88,992
1,917,422(10,000)(6,476)(42,068,346)

Cash flows from financing activities
Proceeds from short-term borrowings

6,010,169

Repayments of short-term borrowings(1,096,433)

Proceeds from long-term borrowings

17,400,000

Proceeds from issuance of investment units

23,057,506

Net cash provided by (used in) financing activities

45,371,242

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

2,792,038
2,792,038

24

SANKEI REAL ESTATE Inc.

Portfolio List

(as of last day of April 2019)As a t Apri l 30, 2019

Property number

A-1

A-2

A-3

A-4

A-5

A-6

A-7

B-1

Type

Office buildings

Office buildings

Office buildings

Office buildings

Office buildings

Office buildings

Office buildings

Sub assets

Property nameTokyo
Sankei Building

BREEZÉ TOWER

S-GATENIHONBASHI-HONCHO

S-GATEAKIHABARA

HibiyaSankei Building

Hatchobori
Sankei Building

ToyoPark Building

Hotel Intergate
Tokyo Kyobashi(2% co-ownership interest)(30% quasi-co-ownership (51% co-ownership interest)
interest of the sectional
ownership of the officeportion of the building, etc.)

Location

Chiyoda-ku, Tokyo

Kita-ku, Osaka-shi

Chuo-ku, Tokyo

Chiyoda-ku, Tokyo

Chiyoda-ku, Tokyo

Chuo-ku, Tokyo

Koto-ku, Tokyo

Chuo-ku, Tokyo

Acquisition price

2,509 million yen

8,600 million yen

6,698 million yen

2,055 million yen

5,829 million yen

4,959 million yen

3,782 million yen

8,961 million yen

Appraisal value

2,540 million yen

9,300 million yen

6,780 million yen

2,080 million yen

5,900 million yen

5,020 million yen

3,790 million yen

9,070 million yen

Appraisal NOI yield

2.8%

4.7%

3.8%

3.9%

3.7%

4.7%

4.4%

3.9%

Construction completion

Sept. 2000

July 2008

Oct. 2018

Sept. 2017

June 1992

Sept. 1965

June 1991

Jan. 2018

Occupancy rate

99.3%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%PML value

2.3%

2.8%

2.0%

2.2%

3.1%

0.3%

9.0%

1.8%

Portfolio
PML value

1.6%

25

SANKEI REAL ESTATE Inc.

Statement of Income from Leasing by Property(actual asset management period: from March 12, 2019 to April 30, 2019)
Uni t: thous a nd yen
Property number

A-1

A-2

A-3

A-4

A-5

A-6

A-7

B-1

Type

Offi ce bui l di ngs Offi ce bui l di ngs Offi ce bui l di ngs Offi ce bui l di ngs Offi ce bui l di ngs Offi ce bui l di ngs Offi ce bui l di ngs

Property na me

TokyoSa nkei Bui l di ng

BREEZÉ TOWER

50 da ys

50 da ys

Actua l ma na gement peri od

S-GATENIHONBASHIHONCHO
50 da ys

S-GATEAKIHABARA

Hi bi ya
Ha tchobori
Sa nkei Bui l di ng Sa nkei Bui l di ng

50 da ys

50 da ys

50 da ys

Sub a s s ets

Toyo
Pa rk Bui l di ng

Hotel Interga te
Tokyo Kyoba s hi

50 da ys

50 da ys

Opera ting revenue

13,45388,83624,20016,14054,09647,42827,56356,745

Rental revenue

11,84765,937

21,593

15,226

46,56839,00420,09056,745

CAM revenue

722

15,182

-

-

3,914

3,781

5,425

-

Pa rki ng revenue

204

1,748

711

100

529

1,827

641

-

Util i ties rei mburs ement

506

4,978

1,857

808

2,210

2,463

1,378

-

Other revenue

172

987

37

5

873

351

26

-

Expens es from l ea s i ng

4,459

19,153

4,135

2,104

6,811

8,170

4,183

565

Bui l di ng ma na gement fee

1,408

9,677

1,502

924

2,965

3,817

1,882

-

Property ma na gement fee

358

1,592

312

329

810

675

487

329

Util i ties expens es

1,191

7,213

1,896

682

2,790

3,096

1,515

-

Ins ura nce premi um

42

207

90

46

103

130

79

166

Repa i r expens es

13

42

-

-

-

-

62

-

Trus t fee

-

68

68

68

68

68

95

68

La nd rent

187

207

-

-

-

-

-

-

1,258

144

264

53

73

382

60

0

8,993

69,682

20,065

14,03547,28539,25823,37956,180865

13,232

6,107

2,576

1,186

4,567

3,086

9,041

Other expens es
NOI
Depreci a tion

26

SANKEI REAL ESTATE Inc.

Top End Tenants by Leased Area (as of last day of April 2019)

Name of end tenant
GRANVISTA Hotels & Resorts Co., Ltd.

Total leased area
(m²)
6,006.5% of portfolio’s
total leased area

Property name

18.2% Hotel Intergate Tokyo Kyobashi

Bayer Yakuhin, Ltd.

Not disclosed

Not disclosed BREEZÉ TOWER

NH Foods Ltd.

Not disclosed

Not disclosed BREEZÉ TOWER

Konoike Construction Co., Ltd.

2,542.7

7.7% S-GATE NIHONBASHI-HONCHO

Hitachi Global Life Solutions, Inc.

2,423.0

7.3% Toyo Park Building

971.7

2.9% Hibiya Sankei Building

K.K. Fujimoto Corporation
Yokogawa Solution Service Corporation

Not disclosed

Not disclosed BREEZÉ TOWER

Ryosan Company, Limited

739.1

2.2% S-GATE AKIHABARA

Shibata Co., Ltd.

738.9

2.2% Hatchobori Sankei Building

Meiji Co., Ltd.

726.9

2.2% Toyo Park Building

JIP InfoBridge Co., Ltd.

726.9

2.2% Toyo Park Building* “Total leased area” for “S-GATE NIHONBASHI-HONCHO” is the figure equivalent to the 51% co-ownership interest in the concerned property acquired by SANKEI REAL ESTATE. “Total leased area” for “BREEZÉTOWER” is the figure equivalent to the 30% quasi-co-ownership interest of the sectional ownership of the office portion of the building, etc. in the concerned property acquired by SANKEI REAL ESTATE.
* “% of portfolio’s total leased area” refers to the total leased area expressed as a percentage of the entire portfolio’s total leased area, rounded to one decimal place.
* “Not disclosed” is information not disclosed, due to unavoidable circumstances in that consent for disclosure has not been obtained from the end tenant, related party, etc.

27

SANKEI REAL ESTATE Inc.

Status of Lease Agreements (as of last day of April 2019; on leased area basis)
Breakdown of Tenants by Contract Form
Ordinary building lease agreement
16.9%

Fixed-term building lease agreement
83.1%

Breakdown of Tenants by Business Type
Other
15.0%

Breakdown of Tenants by Lease PeriodLess than 3 years
19.6%

Service
10.3%

Average

Manufacturing
34.1%

Construction& real estate
10.3%

10 years or more
28.0%

7.3 years(weighted average)

IT
12.5%

Hotel
17.7%

3 years or more,
but less than 5 years
29.3%

5 years or more,
but less than 10 years
23.2%
28

SANKEI REAL ESTATE Inc.

Profile of the Asset Management Company
Profile of the Asset Management Company
Trade name

Sankei Building Asset Management Co., Ltd.

Established

April 13, 2018

Capital

100 million yen

Shareholder composition

The Sankei Building Co., Ltd. 100%

Main line of business

Investment management businessDirectors and auditors

5 directors and 1 auditor

Financial instruments businessregistration

Director-General of the Kanto Local Finance
Bureau Registration (FIBO) No. 3094

Real estate brokerage license

Governor of Tokyo License (1) No. 102209

Discretionary transaction
agency, etc. approval

Minister of Land, Infrastructure, Transport andTourism Approval No. 125

General Meeting of Shareholders
AuditorBoard of Directors
Investment Committee

Compliance Committee
President and CEO
Compliance Office

Investment Management Department

Finance & IR Department• Investment policy planning• Acquisition and sale of assets undermanagement• Corporate planning, accounting andgeneral affaires• Operation and management ofassets under management• Financials and IR

29

SANKEI REAL ESTATE Inc.

Disclaimer

This document is intended for the purpose of providing information on SANKEI REAL ESTATE Inc. (hereinafter,“SANKEI REAL ESTATE”), and is not intended for the purpose of soliciting investment in or recommending the tradingof specific products. Please consult your securities company for any purchase of SANKEI REAL ESTATE investment

units. When making any investment, investors do so at their sole discretion and risk. The information provided inthis document is an analysis or a judgment made by Sankei Building Asset Management Co., Ltd. (hereinafter,“Sankei Building Asset Management”) based on information currently available to Sankei Building AssetManagement, and Sankei Building Asset Management does not guarantee and is not liable whatsoever for theaccuracy, reliability, integrity, etc. thereof. In addition, the content may be changed or abolished without prior notice.
The content of this document contains earnings forecasts and other forward-looking statements. These forwardlooking statements are not a guarantee of future business performance or financial content of SANKEI REAL ESTATE.
All rights to any part of this document belong to Sankei Building Asset Management, and no part of this document

shall be used, cited, reproduced, altered, disassembled, transmitted, etc. by any means, electronic or mechanical,
for any purpose without permission. Please contact below if you have any inquiries concerning this document.

Finance & IR Department
Phone: ＋81-3-5542-131630